Multi-family living in an apartment complex can have its rewards for the residents but for the apartment building owner it carries a lot of responsibility.
One of these responsibilities is the maintenance of an adequate commercial apartment building insurance policy. In the event of a covered loss the apartment building owner not only loses the property he or she has worked so hard to own but there goes their source of income if a loss leaves the housing uninhabitable and the rents stop coming in.
Aside from the usual covered perils of fire, wind damage, vandalism and malicious mischief, water damage and explosion damage to the building there are several endorsements you need to look to for the building coverage.
Your apartment building should be insured to at least 90% of its replacement cost. The coverage should include building ordinance. Most apartment building insurance policies contain a sub limit of coverage available for building ordinance coverage. Building ordinance is often overlooked but can be the greater part of your cost to get the building rebuilt. Be sure you have an adequate amount of insurance for ordinance and that it covers the following:
Coverage A – provides coverage for loss to the undamaged portion of the building. It pays for the loss of value of the undamaged portion of the building that has to be taken down due to the building code or ordinance imposed following a covered loss. This in effect creates a total loss of your building. Since the building no longer meets code it must be torn down or demolished and re-built to code.
Coverage B – pays for the cost to demolish and remove the undamaged portions of the building however the destruction must be due to the building code or ordinance imposed following a covered loss.
Coverage C – provides for the increased costs incurred to repair or rebuild the property to comply with current ordinance or law.
Incorporated into the apartment building owner insurance policy is coverage for your loss of rents. Ideally, this should cover a period of 25 months. Most apartment building owner insurance policies only provide coverage for 12 months but this can usually be increased for a slight additional premium. Any general contractor will tell you a 12 month period to get your building repaired or rebuilt is not enough time unless the damage is very minor and building permits do not have to be pulled. Always request the maximum period of indemnity you can buy when it comes to your loss of rents.
Another important need that is often overlooked is the cost to replace detached exterior signs, appliances that are included in the rental unit such as stoves, refrigerators and dish washers. In addition to that you might have to replace carpeting or flooring or window treatments.
Just as you carefully insure your real and personal property you must also give credence to the liability section of your policy. If your apartment building is worth $5,000,000 do not buy liability insurance for $1,000,000. A liability claim can wipe out your assets just as fast as a fire can destroy your building.
Make sure your liability coverage includes wrongful entry, wrongful eviction and discrimination coverage as these claims can come with a pretty big price for the defense of the claim and potential settlement.
When you are building your insurance policy you should always look to a trusted advisor at EZ Center Insurance Services.